Select Committee on Public Accounts Commission Report

Appendix: Review of the National Audit Office's Corporate Governance, by John Tiner (January 2008)

1  Summary

1. The National Audit Office is a unique and critically important organisation in the UK public sector. Its head, the Comptroller and Auditor General (C&AG) is an Officer of the House of Commons and enjoys complete discretion over the discharge of his functions. This combined with his appointment by Her Majesty the Queen on a motion from the House of Commons makes him completely independent of Government, a sine qua non for the position. The current C&AG has put in place a number of governance processes, but in their effectiveness these fall short of what is currently best practice, even when taking into account the unique role of the Office. In the exercise of his responsibilities the C&AG must, in my view, rely not only on the powers given to him by Parliament, but also on the moral authority which comes from the National Audit Office (NAO) maintaining the highest standards of governance.

2. I have established three objectives in framing my proposals for the future governance of the NAO:

  • The C&AG must have the authority to form completely independent judgements about the audits and value for money and other studies conducted by the NAO and the presentation of these to Parliament.
  • The NAO must maintain systems of governance and internal controls consistent with best practice, applied in ways which do not fetter its independence from Government, and to report publicly on these systems in its Annual Report.
  • The NAO must conduct its work according to relevant auditing and professional standards and prevailing best practice.

3. I propose significant changes to the current governance structure. My main proposals are:

  • The NAO should be formed as a body corporate with a governing board comprising a majority of independent non executive directors. Its main functions should be to set the strategy of the Office, support and oversee the work of the C&AG, ensure the Office (including the C&AG) conducts its business in an economic, efficient and effective way and satisfy itself that the systems of governance and internal controls operate effectively and to the highest standards. The Board should have a Remuneration Committee and an Audit Committee comprised entirely of non-executive directors.
  • The Chief Executive (who would be styled the C&AG) should have complete personal discretion as to the audit judgements he reaches and the presentation of those judgements to the Public Accounts Committee and other committees of Parliament as may be necessary.
  • Both the Chairman and Chief Executive of the NAO Board would be appointed by Her Majesty the Queen on a motion from the House of Commons. The Chairman and the other non-executives should be appointed for a term of 3 years renewable once. The Chief Executive should be appointed for a fixed term of 8 years which cannot be renewed.

4. I recognise that to implement my proposals it will be necessary to introduce new primary legislation. I understand a possible mechanism to effect this exists in the Constitutional Renewal Bill foreshadowed in the most recent Queen's Speech.

5. While I have sought to understand the governance arrangements in the devolved administrations they do not fall within my terms of reference and I make no comment on whether my proposals for the NAO have any application in the devolved administrations.

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